July 8, 2019
But your clients don’t. Orion’s brokers live and breathe rates, but it is a good thing to step back and remember your clients often need a lesson. A large concern for soon-to-be-homeowners is the interest rate they'll receive when applying for a loan. After all, the difference in monthly payments really adds up over the life of a loan.
Brokers explain that rates are primarily based on market conditions, but borrowers have some flexibility in securing the best deal possible. The largest factor determining mortgage availability is credit score, as lenders use this number as an indicator of how likely a borrower is to be successful at paying back the loan. And for good reason. If a borrower has trouble paying back smaller loans like credit card debt, they are more likely to struggle with paying down larger debts like a mortgage.
Good brokers take the time to explain how to change this. Steps to improve a credit score include making the monthly payments every month, paying as much above the minimum payment as possible, and limiting incurring new debt while paying down existing debt.
Orion’s brokers know that another large factor in determining interest rate is to make a sizable down payment, which shows the lender a borrower is capable of saving and lowers the overall loan amount, allowing the lender to offer a better rate.
Loan term also plays a part. The vast majority of loans are either 15-year loans or 30-year loans, and though monthly payments are higher on shorter loan terms, these loans are often eligible for better interest rates. This is because the lender will recoup their investment faster with a shorter loan term, and will also be receiving a higher payment from the borrower each month.
Finally, there are adjustable rate mortgages and fixed rate mortgages, and Orion offers both for your clients. Adjustable rate mortgages start off with a low, introductory interest rate for a set period of time before the rate adjusts itself to be inline market interest rates are at the time, at which point the monthly payment also changes. Fixed rate mortgages are generally higher than adjustable rates from the start, but stay the same over the entire length of the loan, ensuring the same payment to make each month.
Ultimately, it is up to the borrower to choose between a fixed interest rate or an adjustable rate with your help. Taking all these steps into consideration, borrowers can lock in the best deal for themselves.